Aluminum prices slightly rebounded in December
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According to the Commodity Market Analysis System of Business Society, the average price of aluminum ingots in the East China market on December 28, 2023 was 19580 yuan/ton, an increase of 4.86% compared to the aluminum price of 18673.33 yuan/ton at the beginning of the month (December 1).
In the long term, the current price is in a sideways range after a high level decline. Since May, it has been fluctuating below 19000 yuan/ton, and by the end of August, it has exceeded 19000 yuan/ton. In September, aluminum prices first fell and then rose. In October, the center of gravity of aluminum prices fell back to around 19000 yuan/ton and fluctuated. In November, aluminum prices were weak and began to recover after mid December, standing above 19000 yuan/ton.
Current Fundamental Situation
On the supply side, Yunnan’s electrolytic aluminum production has been reduced, with an estimated scale of 1.17 million tons.
On the demand side, orders for new energy vehicles and photovoltaics performed well, but some traditional demand started slightly lower than expected. The off-season effect of alloys, plates, strips, and foils was evident, benefiting from the acceleration of ultra-high voltage and a slight rebound in orders for building curtain walls, while the cable and profile sectors saw a slight increase.
3. Social inventory continues to decline significantly. As of December 25th, the mainstream social inventory of electrolytic aluminum ingots in China was 414000 tons, with 149000 tons of inventory removed compared to November 30th. Based on year-on-year data, it is at a low level in the same period of nearly five years.
4. In terms of cost, the shortage of ore still restricts the start of smelting. Aluminum oxide plants in Henan and Shanxi have no plans to resume production due to the shortage of raw materials. Guangxi is expected to resume production slightly, but the progress is slow. The heating season in the north may increase the possibility of alumina plants limiting production again. Heavy snow weather is spreading in the north, and some electrolytic aluminum plants in the northwest may have a need for early stocking. At the same time, recent road freight rates from Shandong, Henan to Xinjiang have increased compared to the previous period. According to the news, the explosion at the central oil depot in the capital of Guinea has caused a shortage of fuel supply, which has begun to affect ore production. It is reported that Shunda Mining in Guinea has suspended operations of Weili Mining and reduced its production capacity to half. Some bauxite producers have revealed that their existing inventory can only be maintained for about 10 days. At the same time, the tense situation in the Red Sea has increased shipping risks. The price of raw alumina is firm.
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Fundamental variables that may affect prices in the near future
1. The risk of production reduction in Northwest electrolytic aluminum enterprises. Due to the impact of electricity supply, aluminum companies in regions such as Xinjiang and Qinghai may face the risk of reducing production.
2. There is an expectation of a downward shift in the operating rate of downstream processing enterprises in the Central Plains region. Recently, processing enterprises in Henan Province have experienced a decline in production due to environmental control measures.
Future market forecast
The strong price of alumina may continue, and cost support may strengthen. But currently, aluminum prices are also rising rapidly, digesting some of the positive news; Gradually entering the downstream consumption off-season, fortunately, the current social inventory of aluminum ingots remains low, providing some support for aluminum prices. It is expected that aluminum prices will fluctuate strongly in the later period.